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Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment

  • Leonardo Bursztyn
  • Florian Ederer
  • Bruno Ferman
  • Noam Yuchtman

Using a high-stakes field experiment conducted with a financial brokerage, we implement a novel design to separately identify two channels of social influence in financial decisions, both widely studied theoretically. When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice ("social learning") and because his possession of the asset directly affects others' utility of owning the same asset ("social utility"). We find that both channels have statistically and economically significant effects on investment decisions. These results can help shed light on the mechanisms underlying herding behavior in financial markets.

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File URL: http://www.nber.org/papers/w18241.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18241.

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Date of creation: Jul 2012
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Publication status: published as “Understanding Mechanisms Underlying Peer Effects: Evidence from a Field Experiment on Financial Decisions” (with Florian Ederer, Bruno Ferman, and Noam Yuchtman) Econometrica, 82(4): 1273-1301 (2014)
Handle: RePEc:nbr:nberwo:18241
Note: AP CF LS
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